North Korean leader Kim Jong Un gives field guidance to the Kosan Combined Fruit Farm in this undated photo released by
North Korea's Korean Central News Agency (KCNA) in Pyongyang September 18, 2016.
KCNA via REUTERS

Tue Sep 20, 2016 | 4:07am EDT

U.S. President Barack Obama and Chinese Premier Li Keqiang agreed on Monday to step up cooperation in the United Nations Security Council and in law-enforcement channels after North Korea's fifth nuclear test, the White House said.

China and the United States are also targeting the finances of Liaoning Hongxiang Industrial, a Chinese conglomerate headed by a Communist Party cadre, that the Obama administration thinks has a role in assisting North Korea's nuclear program, the Wall Street Journal reported on Monday.

U.N. diplomats say the two countries have started discussions on a possible U.N. sanctions resolution in response to the nuclear test earlier this month, but Beijing has not said directly whether it will support tougher steps against North Korea.

Obama met Li on the sidelines of the annual United Nations General Assembly session in New York.

"Both leaders condemned North Korea’s September 9 nuclear test and resolved to strengthen coordination in achieving the denuclearization of the Korean Peninsula, including by invigorating cooperation in the United Nations Security Council and in law enforcement channels on North Korea," a White House statement said.

China is isolated North Korea's most important diplomatic backer and its biggest trading partner.

It has been angered by Pyongyang's repeated nuclear and missile tests and signed on to increasingly tough U.N. sanctions, but it has said it believes such steps are not the ultimate answer and called for a return to talks with North Korea.

Chinese Foreign Minister Wang Yi told his Japanese counterpart last week China opposes "unhelpful" unilateral sanctions on North Korea but will work within the United Nations to formulate a response.

Washington has pressed Beijing to do more to rein in North Korea. The United States has said it is willing to negotiate with the North if the country commits to get rid of its nuclear weapons, which Pyongyang has refused to do.

HONGXIANG PROBE

The U.S. Department of Justice (DoJ) is preparing as early as this week to announce legal action against Chinese firms suspected of providing financial assistance to Pyongyang, the Journal reported, citing officials familiar with the matter.

It said DoJ prosecutors visited Beijing twice last month to make their Chinese counterparts aware of alleged criminal activities being committed by Liaoning Hongxiang Industrial.

A social media post last week from the police in Liaoning, the northeastern border province of China, said they were investigating the firm's alleged long-term involvement in "serious economic crimes" and that relevant suspects were cooperating.

A report by Asan Institute for Policy Studies in Seoul and C4ADS in Washington says it identified more than $500 million in trade from January 2011 to September 2015 between the North and the Liaoning Hongxiang Group, which states on its website that it trades heavily with the North.

The figure includes more than $360 million in imports from North Korea by one group company, Dandong Hongxiang Industrial Development Co., an industrial machinery and equipment wholesaler.

“While no judgment is being made on the final use of these funds, trade at this volume is of particular note. By one estimate, this amount would have been almost enough to both fund North Korea’s uranium enrichment facilities, and to design, make and test its nuclear weapons,” the report said.

Certain assets related to the company, its founder and top executive Ma Xiaohong, and some of her relatives and associates, have been frozen by Chinese authorities in recent weeks, according to government and corporate filings cited by the Journal.

The Asan report said its trading of goods that could qualify as potential military and nuclear dual-use products under U.S. export restrictions were of particular concern.

The companies identified have had dealings with sanctioned North Korean entities, the report said.

Chang Yong-seok, senior researcher at the Institute for Peace and Unification Studies, Seoul National University, said this case was symbolic and could have real practical impact.

"This was the U.S. taking China into consideration and working with China. More such cases may follow if the U.S. or South Korea have firm evidence ... Chinese companies that have capacity for producing or securing goods for North Korea may be worried now,” he said.

China's Foreign Ministry said relevant departments were investigating Liaoning Hongxiang Group and were following the provisions of U.N. resolution 2270, which imposed tighter sanctions on North Korea in March in response to its fourth nuclear test in January and the launch of a long-range missile a month later.

Representatives of the U.S. Department of Justice and Hongxiang Industrial were unavailable for comment.

The Liaoning Hongxiang Group is also heavily involved in North Korea-related shipping, with Ma and other people associated with the group owning and operating a combined fleet of 10 ships that regularly sail between the North and China.

Ma, who served on Liaoning's People's Congress before resigning at the weekend, is described by Chinese media as the most successful businessperson in Dandong involved in cross-border trade with North Korea.

Government records say Ma's investment in Hongxiang was frozen on Sept. 2.

(Reporting by Jeff Mason, David Brunnstrom, Michelle Nichols and Arshad Mohammed; Additional reporting by Sue-Lin Wong in BEIJING and Ju-min Park and Jack Kim in SEOUL; Editing by Bill Rigby and Will Waterman)